Norfolk's Interstate Corporate Center has seen brisk leasing activity since its change in ownership and management.

Several Big Players Move Into Hampton Roads Offices

HAMPTON ROADS, VIRGINIA --  Historically, the Hampton Roads market, which encompasses Virginia Beach, Norfolk, Chesapeake, Portsmouth, Suffolk, Hampton, Newport News, and Williamsburg,Va., could point to the United States defense industry as the impetus for its commercial development.  But, as the saying goes, the only thing that stays the same is change. As the region’s economy diversifies and new “non-defense related” businesses enter the market, office space vacancies fell below 10 percent throughout Hampton Roads. New industries and new businesses have moved into or expanded throughout the area, intensifying leasing demand in the market.

            Michael Divaris, president of Divaris Real Estate, Inc. (DRE), points to the expansion of several DRE clients, including Ferris, Baker, Watts, Incorporated; Crewestone Technologies, Inc.; MMM Design Group; and Vascular & Transplant Specialists, P.C.  Other major corporate expansions have included American Funds, Trader Publishing, Maersk Lines and LifeNet.

            Projects such as the City Center at Oyster Point and The Town Center of Virginia Beach, have increased the Hampton Roads office market to approximately 22.3 million square feet of net leasable space.   Oyster Point remains the primary submarket on the Virginia Peninsula, containing 2.4 million square feet of Class A and B office space, according to Old Dominion University’s 2006 Hampton Roads Market Survey.

  The Town Center of Virginia Beach alone—located in the city’s central business district—spans 17 city blocks, and provides a mix of Class A office space, upscale retailing, first-class dining, residential dwellings, and entertainment.  In August 2004, the Washington, D.C.-based investment banking firm, Ferris, Baker, Watts, Incorporated, leased 4,598 square feet of office space at The Town Center of Virginia Beach for the expansion of their business on Virginia’s East coast.

Ferris Baker Watts leased office space with naming rights in The Town Center of Virginia Beach.

Currently, the average asking rent for the Hampton Roads market is between $15.64 and $15.84 per square foot for Class A and B office space, as reported by ODU’s Market Survey.  However, with land scarcity and consequent price increases, and a 20 to 25 percent increase in construction costs, new development pricing has been driven so high that demand for new space has been modest, causing developers to exercise restraint in adding a fresh supply of space.

            Seventeen-time Emmy Award winner Crewestone Technologies, Inc., an organization providing film and video production and media systems integration to government agencies and to private industry, also expanded into the Hampton Roads area by leasing 5,726 square feet in the DRE-managed Pinewood Plaza located at 1919 Commerce Drive in Hampton. 

Requiring triple the space, as well as some very specific facilities, Vascular & Transplant Specialists, P.C. joined the list of businesses expanding in Hampton Roads.  In late 2005, they leased 16,050 square feet at the DRE-leased 3300 South Building located in Virginia Beach’s Little Neck Office Park. The Board-certified physicians and medical staff of this vascular and kidney transplant practice, serve referring doctors and their patients throughout southeastern Virginia and northeastern North Carolina.

DRE’s Hampton Roads office leasing endeavors included the lease of an additional 4,306 square feet at Main Street Tower in Norfolk, Va. to MMM Design Group.  This allowed MMM—a full-service architecture, engineering and planning firm, serving higher education, defense, homeland security, criminal justice, transportation, recreation, environmental protection and historical restoration—to expand their corporate headquarters to a total of 26,583 square feet.

Beyond the traditional banking district in downtown Norfolk, additional office nodes include areas adjacent to the Norfolk International Airport.  One property that has seen a great deal of leasing activity in the last year is Interstate Corporate Center, located at the intersection of Interstates 64 and 264.  Geeks on Call, Government Employee Insurance Company, Odyssey Healthcare, Clinical Associates and Tom James Company joined the over 150 international, national and local firms in Interstate Corporate Center.  The office complex, comprised of 17 one- and two-story office buildings totaling 441,896 square feet on a 35-acre landscaped campus, is leased by Divaris Real Estate and is managed by Divaris Property Management Corp.

As for the immediate future of office leasing in Hampton Roads, Michael Divaris believes that the market will continue to grow and absorb the available space. However, much like the rest of the country, the pace of transactions will moderate because of a lack of available product.  Together with a shortage of existing properties, rising building costs will push rental rates for new office space higher than they have been in recent years.